Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTTony DongFri, July 3, 2026 at 6:40 PM GMT+2 5 min readQuick ReadILS provides exposure to catastrophe bonds instead of traditional corporate or government debt: Investors earn high income for assuming insured disaster risk rather than credit or interest rate risk.Returns have historically been driven by different factors than stocks and bonds: Floating-rate coupons and low correlation with traditional markets can provide meaningful diversification benefits.High fees and lower liquidity are the biggest trade-offs: A 1.58% expense ratio, wider bid-ask spreads, and less efficient NAV arbitrage make ILS a specialized ETF best suited for investors who understand its unique risks.Don't wait: the analyst who called NVIDIA in 2010 just revealed his top 10 AI stocks. See the full list FREE now.Thinkstock / Getty ImagesThe cost of insuring against natural disasters has climbed sharply over the past decade. More people are living in coastal regions, wildfire-prone communities, and other high-risk areas, so when disasters strike, there is simply more property to repair or replace. At the same time, many scientists and insurers attribute a growing share of insured losses to climate change, which is increasing the frequency or severity of certain weather-related events.The result has been steadily rising insurance claims and, in some cases, insurers pulling out of entire markets because the risks have become too expensive to underwrite. Now, insurance companies don't shoulder all of that risk themselves. Instead, they often purchase protection from reinsurers, specialized insurance companies whose business is insuring other insurers. They basically pay a premium to transfer part of that risk to a larger institution with greater underwriting capacity.The chain doesn't stop there though. Reinsurers can transfer some of that exposure directly to capital markets through catastrophe bonds. These are specialized bonds where investors receive attractive interest payments in exchange for accepting the risk that some or all of their principal could be used to cover insured losses if a predefined catastrophic event occurs. Don't wait: the analyst who called NVIDIA in 2010 just revealed his top 10 AI stocks. See the full list FREE now.Until recently, catastrophe bonds were largely the domain of institutional investors. The ETF structure has changed that. Investors can now gain diversified exposure through products such as the Brookmont Catastrophic Bond ETF (ILS), which currently offers a 12-month trailing yield of approximately 8.1% as of July 2, 2026. That's firmly in the territory of high-yield, or "junk," bonds.Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info